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Have you ever wondered how some companies succeed in growing new lines of business like magic? One of the latest examples is Amazon’s hot new natural language interaction business, known as Alexa. Alexa let’s users not only shop online, but also lets them automate many other things. Alexa skills, the catalogue of automated interactions, grew from 7000 skills in January 2017 to over 15.000 in June 2017. Going from a successful local test with one skill to full-blown nation-, soon worldwide operations in just a few months is an impressive feat. Doing it with thousands more at the same time is outstanding. Of course, global companies like Amazon already have lots of resources available from existing lines of business. So in theory, they only need to organize support for the new line of business in these existing structures, right? Isn’t this easy?

As a matter of fact, it’s not. Structures in most businesses are there for a single purpose: to support and protect exactly the existing line of business. Over time, this structure is optimized more and more, resulting in being hardwired to the dedicated business case. Re-organizing even a small part of such structures to support a new line of business is difficult and time-consuming. It can not be done without bringing in additional resources dedicated to the new business. The amount of required resources greatly depends on the intended operational scale of the new business. While a local business can be operated with a small staff, worldwide operations require hundreds and thousands of employees. Right-sizing new operations is best done while slowly expanding the business. This way, it is possible to achieve a profitable balance between the amount of resources required to satisfy growing market demand. Jumping into global operations very fast requires an explosive build-up of resources, significantly increasing the risk of wrong-sizing operations.

Some years ago, this logic applied also to Amazon. But then, Amazons CEO Jeff Bezos decided to turn his whole company into a fully digitally enabled business; one that could scale business operations and easily connect them with each other without adding much resources. What he did in 2002 was unprecedented, as disclosed by a former employee (1). He ordered his whole company, every single unit within it, to operate as a business service. Plus, every business service had to develop standards for digital communication to offer and deliver value-add in the Amazon service ecosystem. Plus, all other ways of communication and transaction management between business units had to be shut down. It sounded crazy at the time.

15 years later, businesses around the world feel the impact of this decision. Amazon now is an ecosystem of businesses held together by a super-fast, super-efficient digitally connected framework of standardized, yet autonomous services. This framework can run billions of transactions in a completely automated fashion. It can easily integrate and connect value streams inside its ecosystem. Businesses inside the ecosystem can quickly and without much additional resources share their capabilities to test any promising new business opportunity. It doesn’t matter if their digital service interfaces process one request per hour or millions. They don’t need to care much about managing the scale of new operations. Many activities that were formerly required to manage the growth of operations are completely unnecessary in their world. With limited resources, they can scale business operations infinitely.

This characteristic is one of the many benefits of business platforms. Jeff Bezos was very early to understand the power of digital platforms for business. As a pioneer in this field, it took Amazon many years to figure this out. In today’s world of business, platforms are emerging everywhere. But few businesses are going all in like Amazon – transforming the whole company into an ecosystem of business services. The ones who do it will be richly rewarded.

Some days ago, we read about Amazon’s latest acquisition, Whole Foods Market, an organic grocery chain. From the perspective of established business, a cross-industry acquisition like this is unexpected and seems somehow strange. From the perspective of Amazon’s goal, becoming “the marketplace for everything”, this acquisition was a logical step. Amazon aims to provide everything that makes life more convenient. This includes services of any kind. Amazon therefore does not limit its business operations on a single industry or market. It aims to cross-connect all services and markets into their business ecosystem. This different strategic perspective makes it easy to think outside of established markets. Then, cross-over innovation becomes the new normal in business operations.

Let’s step back for a moment and look at the fundamental changes brought along by digital markets. Of course, markets have always changed. Today this seems to happen with a global reach at an unprecedented pace and driven by new technology and connectivity. This change perpetually creates new types of business opportunities across domains and industries, with increasing speed and decreasing investment costs. All markets will have to deal with this dynamic sooner or later. We therefore call it the age of hyper-dynamic markets. In these markets, businesses need to look beyond their usual search patterns to find profitable opportunities, they need to do it at scale, and much faster to compete successfully. In addition, the time to profit from a new business opportunity becomes increasingly short: The time frame to identify the opportunity ahead of competitors, the time to “rally the troops”, i.e. to pull together resources and build a business operation dedicated to the new opportunity, and the time to earn money from it might also be much shorter than businesses are used to. Businesses today try very hard to improve innovation and become faster and more flexible in their operations in order to overcome these problems.

But very few get down to the fundamentals of what is really holding them back: They still rely on organizational structures that were built for repetition and stability, and not for cross-over innovation. These structures are not competitive enough when long-term success depends on the ability to pivot a business very fast towards more promising opportunities. Amazon and Chinese company Haier, the world’s leading brand of household appliances, impressively and repeatedly demonstrate this ability. Their success can not only be attributed to strong and visionary leadership, or their high-performance culture. There is something more, that makes these companies so incredible fast, flexible, and able to perform very well across a wide field of vastly different business operations.

It is an organizational structure based on principles of entrepreneurial autonomy and reusable services, largely aligned through digital interfaces. Amazon and Haier work like digital marketplaces of business services for entrepreneurs. Business operations can quickly be set up by combining a customized front-end operation with standardized back-end services. These back-end-services are readily available for any kind of business operation. They offer a comprehensive catalogue of basic services, like accounting, cloud storage, invoicing, payment, or shipping, that every business operation needs. They also offer a lot of specialized and unique services, like e.g. Amazon Wallet, or Haier’s open R&D partnership ecosystem HOPE. Each service in essence provides a high-performing business capability, that can easily be integrated into any kind of business operation. Combined, this business architecture can quickly gain track across a wide spectrum of markets or industries. It can explore much more business opportunities in parallel than traditional businesses. It can scale up profitable business operations much faster. It can very easily establish a system of distributed control and management that is much more efficient than traditional organizational structures.

Amazon and Haier today already provide a glimpse of the future of businesses. We at co-shift expect that businesses who work like a marketplace for entrepreneurs, sharing assets and business capabilities, will dominate markets in the digital age. We think that businesses today should carefully consider their own position: What role will they play in their market 10 years from now? Can they turn themselves into marketplaces for entrepreneurs, ready for innovation at scale?

Most businesses today base their operations on the exploitation of a few well-understood business opportunities. They have optimized their performance to make the most of these opportunities, and defend their turf against competitors in their market. This focus on a single market, a single type of business and a known type of competitors will likely not be sufficient to ensure long-term success. The age of hyper-dynamic markets will bring along competitors from outside of established markets. It will lead to much more innovation. It will lead to products and services that can easily be substituted. It will lead to a much shorter lifecycle of products, business models, and business operations.

The age of hyper-dynamic markets will be brought along by connected products and services, and by businesses that can quickly and deeply connect their operations through digital interfaces. We already observe this happening in some industries. It won’t stop there. All industries will likely be connected through digital interfaces sooner rather than later. This is the time when businesses start to connect operations across industrial domains that until now clearly separate markets and business opportunities from each other.

What does this age of hyper-dynamic, digitally connected markets mean for businesses today? It means that businesses can not rely anymore on a single line of successful operations. This single line of operations will inevitably loose its competitive edge and profitability one day. Hyper-dynamic markets make it impossible to predict when this will happen, reducing the time to adapt to zero. Businesses therefore need to be ready for the end of their money-making operations at any time.

As a way to balance this risk, they need to prepare themselves by building specific capabilities now, while there is still time:

Widening the scope of innovation beyond current branches of business

Easy, early and quick testing of new business opportunities

Partnering and collaboration across industries

Flexible scaling mechanisms according to market demand

This leads towards instant collaboration across established domains, industries and groups of stakeholders. Collaboratively shaping business opportunities into new markets becomes the regular mode of operation in hyper-dynamic markets.

How to do this? We explore breakthrough concepts for this challenge in our book FUTURE LEGENDS – Business in Hyper-Dynamic Markets. Our next post in this series will explain how to turn businesses into marketplaces for crossover innovation and collaboration.

Companies in all markets begin to feel the pressures of a dynamic world. Many respond by trying to become more “agile” – a mix of increased speed, flexibility and more product innovation. They then regularly report progress: How they act faster, how their products are better, how they have become “agile” in their operations. Whenever I see those kind of reports, I always ask myself: Is the progress this company made really sufficient to deal with its future market? What if this market stopped developing in the expected way? What if their customers developed a taste for a different product or service? How fast would this company be able to pivot their business model, their operations, their capabilities? Would it be fast enough to secure their position in the market?

The reality is that most companies need an awful lot of time to do this shift – years or even decades. It is way slower than the dynamic of todays markets demand. This dynamic sometimes can be measured in months, weeks and days. And I expect this to become the norm across all sectors of business: An age of hyper-dynamic markets awaits. In this age, businesses need the ability to operate on a fundamentally higher level of dynamic. It means much more than speed and efficiency. In addition, it means to be able to

flexibly scale any kind of operation and opportunity

adapt operations to different business contexts and opportunities

quickly connect operations with opportunities in any market

A company with those skills could pursue many kind of opportunities, and do it nearly at the same time than these opportunities show up. It could scale operations up and down in synchronicity with the changing demand in markets. It would not necessarily have to protect their most valuable operation at the expense of more promising opportunities. A company with those skills would not need to fear the dynamic of future markets. It would profit from high dynamic.

In order to achieve those essential business skills for dynamic markets, it would need to get rid of everything holding back the development of the skills for dynamic markets. Specifically from organizational structures and practices of management that were designed for a different age. An age were stability and predictability was more important than the ability to change and adapt. Companies need to leave the old structures behind in favor of much more flexible and entrepreneurial business systems. How do such business systems look like? How to transform existing organizational structures into ones needed for highly dynamic markets?